Back in the 80's, the acronym "JIT" became popular. This stood for Just-in-Time. The term was used to describe an inventory strategy whereby companies maintained on hand only enough material for immediate production and carefully monitored inventory levels to trigger re-ordering of parts. The goal was to not waste money on the carrying costs associated with excessive stocking up on large amounts of parts and raw materials.
This approach has become much more ingrained in industry over the years as business-to-business communication has improved and robust supply chain software has made its appearance.
Driven by recessionary caution, however, tech companies are taking things a bit further. It suggests they are driving the good old JIT concept to new levels.
Integrated circuit distributors now say that inventory levels are down to 2-3 weeks at many of their customers and may not recover until February 2009. These levels are roughly half of what is typically seen.
There are reports from Taiwan suppliers that several top PC vendors are cutting order volumes for 1Q09 by 50% year-over-year. Dell and HP are among the vendors mentioned.
These two reports reinforce each other. Tech companies are cutting it very close to the bone with respect to inventory and orders for components. Their fears of shriveling demand are driving these companies to prepare for the worst.
Luckily, the years of practicing JIT are now allowing these companies to cut back significantly on order volumes without totally giving up responsiveness to unexpected customer demand.
As a side note, the reports described above make the recent IDC forecast for slower PC growth seem rather optimistic. (read "IDC forecasts slower PC growth - how bad will it be?")
In any case, it seems tech companies expect to be in the doldrums for at least another quarter or two. It makes one wonder whether we can we trust the recent rally in the NASDAQ. Time will tell.
This approach has become much more ingrained in industry over the years as business-to-business communication has improved and robust supply chain software has made its appearance.
Driven by recessionary caution, however, tech companies are taking things a bit further. It suggests they are driving the good old JIT concept to new levels.
Integrated circuit distributors now say that inventory levels are down to 2-3 weeks at many of their customers and may not recover until February 2009. These levels are roughly half of what is typically seen.
There are reports from Taiwan suppliers that several top PC vendors are cutting order volumes for 1Q09 by 50% year-over-year. Dell and HP are among the vendors mentioned.
These two reports reinforce each other. Tech companies are cutting it very close to the bone with respect to inventory and orders for components. Their fears of shriveling demand are driving these companies to prepare for the worst.
Luckily, the years of practicing JIT are now allowing these companies to cut back significantly on order volumes without totally giving up responsiveness to unexpected customer demand.
As a side note, the reports described above make the recent IDC forecast for slower PC growth seem rather optimistic. (read "IDC forecasts slower PC growth - how bad will it be?")
In any case, it seems tech companies expect to be in the doldrums for at least another quarter or two. It makes one wonder whether we can we trust the recent rally in the NASDAQ. Time will tell.
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